It seems that the ACT Chamber of Commerce does not want to retain a highly-skilled workforce in Canberra. Its proposal to cut expenditure on government schools threatens to return ACT education to the dark ages of lower school participation rates and Year 12 completion.
The Chamber claims that the ACT is spending too much on education in comparison with NSW and Victoria and should benchmark its spending against these states. However, the Chamber has failed to understand the main causes of the expenditure differences. They are:
- A much higher proportion of ACT students stay on at school longer;
- The ACT levies very high book entry charges on government schools;
- The ACT school system is small and has much lower economies of scale;
- The ACT has higher employee on-costs such as superannuation.
Retention rates to Year 12 in ACT government schools are much higher than in NSW and Victoria. The ACT retention rate from Year 7 to Year 12 in 2012 was 105 per cent compared to 71 per cent in NSW and 77 per cent in Victoria (the ACT rate is greater than 100 per cent as a result of cross border students attending ACT schools). The Year 10 to Year 12 rate for the ACT was 101 per cent compared to 71 per cent in NSW and 76 per cent in Victoria.
Years 11 and 12 are the most expensive years of schooling because of greater subject choice, more sophisticated technical equipment requirements and smaller class sizes. The much larger proportion of students in these higher cost years contributes to higher average expenditure across all ACT students compared to NSW and Victoria.
The much higher retention rates in the ACT should be seen as a benefit, not a cost to be reduced. Staying longer at school is a key component of the national goals of schooling agreed by all Australian governments. It brings huge benefits to individuals and the local economy in the form of a higher skilled workforce. A Year 12 education provides the necessary base for further education and the development of the knowledge and skills needed in ACT industry.
The Chamber’s indulgent ideological pursuit to cut government expenditure has blinded it to the benefits higher education expenditure in the ACT brings in terms of a higher skilled workforce. No doubt many of its affiliates who rely on a continuing supply of highly skilled employees will be alarmed at the Chamber’s position.
The Chamber has also failed to understand other factors contributing to the higher expenditure on government schools in the ACT.
The ACT Government levies very high book entry capital charges on government schools which distort inter-jurisdictional expenditure comparisons. In 2011-12, the user cost of capital charge in the ACT was $1719 per student higher than in NSW and $2135 higher than in Victoria. Depreciation in the ACT was $998 per student higher than in NSW and $1076 per student higher than in Victoria.
The ACT also incurs higher administrative costs than NSW and Victoria because it is a much smaller school system and lacks economies of scale in administration. Out of school administration in the ACT in 2011-12 was $753 per student higher than in NSW and $576 per student higher than in Victoria.
The higher capital charges and administrative costs in the ACT account for a large proportion of the expenditure difference with NSW and Victoria. For example, they account for nearly 70 per cent of the difference in per student expenditure between NSW and the ACT.
While teacher salaries in the ACT are on a par with NSW and Victoria, its employee on-costs are significantly higher. In particular, ACT government employees have more favourable superannuation benefits, which have been critical in attracting and retaining employees. Cutting these benefits would make it harder to attract and retain high quality teachers.
Other, less significant factors also contribute to the expenditure differences. For example, ACT government school expenditure includes a notional payroll tax item of 6.85 per cent which is significantly higher than payroll tax on NSW (5.45 per cent) and Victorian (4.90 per cent) government schools.
The call by the Chamber of Commerce for reduced expenditure on government schools in line with that in NSW and Victoria would be a disaster for local students and industry. It also reveals a gross lack of understanding of the reasons why the ACT has higher expenditure than these states. It is not a good start for the new CEO of an organisation which has been generally supportive of a high quality ACT education system in the past.